Who Does the IMF Represent?
from The Progressive magazine July 1998
On April 21, (1998) the House Banking Subcommittee on General
Oversight and Investigations held a hearing on the International
Monetary Fund. Representative Bernie Sanders, the socialist and
independent from Vermont, gave an opening statement and then questioned
Timothy Geithner, Assistant Secretary for International Affairs
for the Treasury Department. What follows are excerpts from that
Bernie Sanders: We are here today, among other things, to
find out if the IMF is an institution that serves the interests
of the working people and the middle class of the United States-the
vast majority of our citizens-or whether the IMF is simply a front
group for giant banks, global corporations, and wealthy investors.
Who does the IMF represent?
We are here today to find out if the IMF is improving the
lives of the people of the Third World, many of whom are living
in desperate, grinding poverty, or whether the IMF primarily serves
the interests of the local ruling classes and elites in those
countries in which the IMF does business.
Further, we want to know whether the representatives of the
United States to the IMF in the Reagan Administration, the Bush
Administration, and the Clinton Administration have obeyed the
law. Some of us spend a lot of time up here doing our best to
make laws that we think are sensible, and every now and then we
would like the law to be obeyed.
Congress for the last twenty years has repeatedly required
specific actions by United States Executive Directors to the IMF,
but there is grave doubt as to whether these legal requirements
have in fact been carried out.
Some of us want to know if the IMF strengthens or undermines
democracy around the world. The New York Times described the IMF
and its sister institution, the World Bank, as "the overlords
of Africa." Ninety countries with more than half the world's
population have lived directly under IMF-imposed conditions. In
other words, the IMF has had an enormous impact on billions of
people throughout the world.
How well has the IMF performed in improving the lives of the
people in the Third World?
Has the IMF helped countries who come to it for loans become
more self-sufficient, or has it turned them into loan junkies?
One might think that after the IMF is done with these countries,
they would be less in debt than before the IMF got to them in
the first place. It is disconcerting to learn, therefore, that
from 1982 through 199O, debtor countries in the South paid their
creditors in the North $6.5 billion in interest and another $6
billion in principal payments every month, as much as the entire
Third World spends on education and health.
Yet the debtor countries were 60 percent greater in 1990 than
in 1982. In other words, after cutting all of their basic programs,
they were more in debt than when the IMF got to them in the first
place. Does that sound like a successful loan program? Not to
me it doesn't. It sounds like loan-sharking, to be honest.
Mr. Geithner, you won't mind if I quote: "The United
States pursues the advancement of human rights through a variety
of diplomatic channels and international institutions. As provided
in legislation, the United States Executive Director has opposed
IMF financing to countries about which the United States has human-rights
concerns or countries harboring war criminals." That is what
you wrote, is that correct?
Timothy Geithner: I am not sure. I didn't read it as you were
reading it, but I assume that is what I wrote.
Sanders: Well, I am a good reader. I read exactly what you
wrote. Having said that you are fighting hard for human rights,
trying to obey the law here, this is what the State Department
says in its annual human-rights report for 1996 regarding Indonesia,
and I quote, "Despite a surface adherence to democratic forms,
the Indonesian political system remains strongly authoritarian....
Further, the report states, and I quote, "The government
continued to commit serious human-rights abuses.... The authorities
maintain their tight grip on the political process, which denies
citizens the ability to change their government democratically."
Now let me read you from the law that was passed by the United
States Congress, and it has to do with an amendment that I played
a role in called the Sanders-Frank Amendment of 1994: "The
Secretary of Treasury directs the United States Executive Directors
of the international financial institutions to use the voice and
vote of the United States to urge the respective institution to
adopt policies to encourage borrowing countries to guarantee internationally
recognized worker rights and to include the status of such rights
as an integral part of the institution's policy dialogue with
each borrowing country."
Now, it seems to me on the surface you very clearly disobeyed
the law. The State Department tells us we have an authoritarian
government that does not believe in human rights. The law says
you should use your voice and vote against providing loans to
those countries, and you provided billions of dollars to General
Suharto. Can you please tell me what was going on?
Geithner: We have a set of procedures under which the State
Department essentially tells us which countries meet these standards,
and we then vote against, or oppose assistance to, countries who
the State Department so designates.
The State Department has identified five countries for which
it has, so-called, a policy of human rights, and the five countries
are China, Sudan, Ecuador, New Guinea, Iran, and Mauritania.
Sanders: Excuse me. I am a little bit confused. I just read
to you from a report of the State Department which says that Indonesia
is an authoritarian, undemocratic country which, among other things,
jails the leader of the labor movement in their country. Now I
am a little confused. That is what they say but they don't tell
that to you? They keep that a secret from you or what?
Geithner: The law has a different standard than the standard
of the report.
Geithner: We don't make an independent judgment at the Treasury
because it is not really our expertise on how to interpret standards
of law or how to judge which countries are quote, "gross
violators of internationally recognized human rights."
Sanders: You don't know how to do that?
Geithner: We at the Treasury don't believe-don't make an independent
judgment on that. We defer to the State Department on that.
Sanders: I read to you from the State Department, which says
that you have an authoritarian undemocratic government, but that
is not good enough for you, and then the United States Congress
tells you not to provide funding for those type of countries.
But I am a little bit confused here.
Geithner: You are asking a good question.
Sanders: It is a good question, and I would like a good answer.
Geithner: This law was passed. The law sets the standard.
We apply the standard through a set of procedures under which
we defer to the State Department on a judgment of which countries
meet the standard.
They so inform us, and when they do we oppose loans to that
Sanders: Let me see if I can try to translate. The Congress
tells you not to provide funding for governments which are authoritarian
and suppress internationally recognized workers' rights. The State
Department writes a report that says Indonesia suppresses human
rights and is an authoritarian country.
But then in connection with the IMF, the State Department
suddenly does not include what they wrote in their annual report
but they worry about Mauritania and-what?-North Korea?
Some of us aren't that sophisticated. We kind of thought that
when the State Department says that a country is authoritarian,
when we say don't fund authoritarian countries, that you might
want to obey the law.
Geithner: This is not an issue of sophistication. It is that
the law has a different standard than the standard in the human
rights report, and that is not something that we are responsible
Sanders: I think you are responsible for it, and I think that
is a very feeble excuse. I think you have done something in violation
of the law..
World Bank, Structural Adjustment